Expensive For A Reason
Jeroen Blokland | Jan 16, 2020 09:51
US equities are expensive and have been for quite some time now. But perspective matters. For example, the top-five stocks in the S&P 500 – all technology names – now make up nearly 18% of the overall index, a historically high weight. And as technology stocks tend to have a relatively high valuation, this is reflected at index level as well. But other factors are also important.
A good example of this is inflation, which despite rising above 2% in the US, remains muted. Historically, the valuation of equities tends to be higher when inflation is low. And this time is no different. So, while US equities are expensive based on traditional valuation measures, this is for a reason.
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